The European Commission has referred Spain to the European Court of Justice, over allegations that 2006 regulations extending the powers of the Spanish electricity and gas regulator, Comision Nacional de Energia, restrict the free movement of capital within the EU.

The regulation in question is the Spanish Royal Decree-Law, which states that the acquisition of a substantial percentage of any company engaged in activities regulated by the Comision Nacional de Energia (CNE) must be subject to an authorization procedure.

According to the European Commission (EC), this constitutes unjustified restrictions on the free movement of capital and the right of establishment and is therefore in violation of EC Treaty rules that allow companies unrestricted operations within the EU.

The EC stated that the prior authorization procedure goes beyond what is necessary to safeguard the minimum supply of essential energy products and services and may deter investment from other member states.

The commission added that it believes the public interest concerns could have been addressed by less restrictive alternative arrangements.

The EC concluded that it had taken Spain to court as, although the country had been given chance to take the necessary measures to modify the legislation, it had failed to do so to the commission’s satisfaction.

According to the Associated Press, the EC’s decision comes as part of an ongoing conflict between Madrid and Brussels, over Spain’s attempts to prevent a E27 billion takeover bid for Endesa, currently being tendered by Germany’s E.ON. Spain hopes to keep the operations of its largest electricity company in Spanish hands.